PROFESSIONAL LIABILITY

Broker Insight Report:

How Insurance Oversights Can Lead to Devastating Claims Denials

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PROFESSIONAL LIABILITY Focus on giving advice instead of defending it.

Imagine this scenario: you’ve provided a service and shared your expertise. And

now you’re being sued by the very client you helped — because of the service you

provided. Regardless of your industry, if you provide guidance or counsel, you are

at risk of a Professional Liability (also known as errors and omissions or E&O)

lawsuit. And today, with the professional services market becoming increasingly

competitive and litigious, your risk is greater than ever.

TOP FIVE PROFESSIONAL LIABILITY ACCUSATIONS

Professional Liability claims can include a variety of accusations. Here are the top five:

Misrepresentation

Breach of professional services

Wrongful business practices

Misleading advice

Conflict of interest

It’s Not All about You Make sure to carefully vet your vendor partners; they can be a key source of

professional liability exposure.

Don’t fall into this trap. Evaluate all contractors, subcontractors and vendors

before you hire them. If it’s too late for that, Professional Liability coverage can

save you from a potentially devastating lawsuit and significant damage to

your reputation.

of business owners underrate their vendor risk14 and fall victim to Professional Liability lawsuits because of those relationships.

32%

If something goes wrong, a small company has a limited balance sheet. They may not have the funds to respond or defend themselves. Traditional professions can’t survive without proper Professional Liability insurance. No one is immune from litigation today. It can mean exposure that people don’t even realize.

— Executive Vice President

14 NAVEX Global's 2015 Ethics & Compliance Third Party Risk Management Benchmark Report

Try It On for Size There’s no such thing as a one-size-fits-all Professional Liability policy, because each

professional services industry and market has its own unique risks, exposures and

potential coverage gaps.

Find a specialist broker to negotiate coverage specific to your industry,

market and location.

Remember: your general liability policy doesn’t cover your professional exposures. A general liability policy never offers umbrella protection. Rather, it is limited in its

scope, applying only to personal and bodily injury and property damage. It will not

cover a Professional Liabilities claim.

Not everything that happens to you is covered under any one type of insurance, and sometimes things happen that are covered under multiple insurance policies. That’s why it’s important to explore any coverage available, including any overlap, and measure it all against your risk.

— Senior Vice President

Top Four Ways to Avoid a Professional Liability Claims Denial

1. Make sure your policy is unique to your professional service. Look for a broker who specializes in your professional service. Be wary of those

who don’t complete a thorough analysis of your services and their potential

exposures prior to quoting policy limits.

2. Ensure your policy is as broad as possible. Narrowing exclusions could overlap with your greatest exposures — make sure

your core business functions aren’t excluded. For example, a technology

services firm that has developed an app used to collect data should not buy a

policy with a data-collection exclusion.

3. Be sure your policy correctly identifies all the professional services you offer. Make sure the policy’s definition of professional services includes everything you

do; otherwise, you may face exclusions and coverage denial in areas not

explicitly mentioned.

4. Insist on a policy that takes into account your entire suite of coverage. When all your policies line up together, gaps in coverage will be minimized,

if not eliminated.

Investors’ expectations prove costly for asset management firm

When an investor’s returns do not meet their expectations, it can lead to a significant

exposure. One asset management firm found this out the hard way, with a lawsuit

that resulted in a $950,000 settlement. Despite the firm’s strong track record, it was

not immune to claims by disgruntled investors who, following a downturn in the

financial markets, alleged errors on the asset manager’s part. Such high-stakes cases

can often result from events over which the asset manager has no control, such as an

Initial Public Offering (IPO).

Online billing software crash results in a costly Professional Liability claim

Hundreds of companies keep track of, and issue, corporate billing statements using

an online application created by one technology firm. Due to an unexpected technical

error, the application crashed and was unavailable for 24 hours, leaving users unable

to process their statements. A resulting lawsuit led to a costly Professional Liability

claim for the technology firm.

Bad tax advice opens the door to IRS fines and audit

A tax-consulting firm gave inaccurate advice to a small business; the business then

filed misstatements with the IRS that resulted in fines and an audit exposure. The

small business sued the tax-consulting firm for its error, triggering the firm’s

Professional Liability policy.

Incorrect care label costs a clothing manufacturer $500,000

A retail store chain sued one of its clothing manufacturers, blaming the vendor for

numerous customer complaints and returns related to claims that the clothes shrank

when washed. The culprit was eventually determined to be an incorrect care label

sewn into the garments, and the manufacturer settled for $500,000 — which was

paid by the company’s Professional Liability policy.

Real Professional Liability Claims Stories

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Protect what matters most.Learn how professional liability protects your business and your reputation.

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Advocacy | Tailored Insurance Solutions | Peace of Mind